1. Copyright © 2005 Global Insight, Inc. The Many Faces of the US Manufacturing Sector Frantz Price Managing Director, Analytic Forecasting Division Washington, DC June 8, 2005

2. Copyright © 2005 Global Insight, Inc.2 Presentation Outline  Manufacturing activity in the US has rebounded from its longest period of weakness in years. But, what’s ahead?  Production  Employment  Prices  Best and worst industry performers

3. Copyright © 2005 Global Insight, Inc.3 Manufacturing Activity has Bounced Back

4. Copyright © 2005 Global Insight, Inc.4 …Driven by Investment-related Products

5. Copyright © 2005 Global Insight, Inc.5 However, Manufacturing Employment has Plunged

6. Copyright © 2005 Global Insight, Inc.6 …While Productivity has Surged

7. Copyright © 2005 Global Insight, Inc.7 Investment-Related Products Carry the Lion’s Share of Manufacturing Employment

8. Copyright © 2005 Global Insight, Inc.8 Materials Prices have Soared, but Pass-through Impact is Generally Moderate

9. Copyright © 2005 Global Insight, Inc.9 Industries with Fastest/Slowest Output in 2005 – 2006 Fastest Production, Average Annual Growth Computers/Semiconductors 17% Medium/Heavy Trucks 17% Communication Equipment 14% Navigational/Measuring Equip. 8% Medical Equipment & Supply 8% Slowest Production, Average Annual Growth Apparel -8% Textiles -5% Leather -4% Tobacco -3% Wood Products -2%

10. Copyright © 2005 Global Insight, Inc.10 Which Industries will Add/Cut Jobs in 2005 – 06? Add Employment, Average Annual Growth Nonmetallic Mineral Products 2.5% Machinery 2.4% Fabricated Metal Products 1.8% Miscellaneous Manufacturing 1.7% Food Manufacturing 0.4% Cut Employment, Average Annual Growth Apparel -8.4% Textiles -6.7% Tobacco -1.5% Wood Products -1.2% Furniture -0.4%

11. Copyright © 2005 Global Insight, Inc.11 Manufacturing Sector Outlook — Bottom Line  Production growth slows compared with 2004  Investment remains primary engine of growth  Overall manufacturing employment stays stagnant  Materials prices peak — finished goods price inflation remains moderate  Cost containment is still a key management focus  Capacity expansion is limited  Productivity gains decelerate but stay strong